Mark Savel

Closing Costs When Purchasing Real Estate

These are expenses occurred when purchasing real estate. All may not apply but it’s better to be prepared then surprised at closing. These fees are typically handled by the lawyer at closing.

Deposit - At offer time you’ll be asked to give a deposit to the seller as a form of security and good faith until the deal closes. The amount of the deposit may be as high as 5% and is held in trust typically with the listing brokerage. At closing the deposit is applied to the purchase price of the property in the form of an adjustment.

Down Payment - This is the amount given to the bank. The deposit is also included as part of the down payment. If the down payment and deposit is greater than 20% of the purchase price no insurance is necessary. If the amount is less than 20% then mortgage loan insurance is necessary. (see below)

Mortgage Loan Insurance Premium - If you decide to purchase property with less than 20% down payment, the bank will require you to insure the loan. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing. The amount will vary based on size of down payment. The insurance protects the bank if the purchaser defaults on the loan. The appropriate tax’s for using the insurance must be paid at closing as well. This insurance is purely used as protection for the bank and not to be confused with Home Owner’s Insurance

Home Owners Insurance - You must arrange public liability, fire and extended perils insurance for the home you are buying effective the day of closing to protect your interests. (Condominium purchases are exempt, though you should arrange content and liability insurance)

Status / Estoppel Certificate Fee - This fee applies only if you are buying a condominium unit and could cost up to $100. A prudent buyer’s Sales Representative will work in your best interests, and negotiate for the seller to pay this fee.

Land Transfer Tax - This is a tax paid by the buyer when purchasing property. If buying in Toronto both the Toronto Land Transfer Tax and the Ontario Land Transfer tax are paid at closing. If you are purchasing outside of Toronto then only one Land transfer tax is paid (Ontario Land Transfer Tax) Click here for a great website that not only explains the tax but also offers a calculator to compute the tax.

Adjustments - At closing your lawyer will present you with a statement of adjustments. This figure must be paid to the seller at closing. It covers any prepaid expenses the seller has paid throughout the year. It ensures that you pay for what you use and that the seller is refunded for what they don’t.

Survey - The mortgage lender may ask for an up-to-date prior to finalizing the mortgage. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range. It is usually negotiated during the offer to be included in the purchase price.

Legal Costs - Fees vary based on lawyers used and type of property purchased.

Title Insurance - Depending on the company providing the insurance the cost may vary. Title insurance is used to protect against defects in title with the property.

Utilities - You must contact the various utility departments that service the property you are buying and arrange for an account in your name as of the closing date.

Commission - Typically the seller pays the buyers sales representative.

Other costs above and beyond the ones mentioned here may occur, amounts may vary. This is meant to be used as a guideline only.